This week, after 20 years of RAM work on sales tax fairness, the US Supreme Court ruled in favor of the future of our Main Streets by overturning the 1992 Quill decision on remote seller tax collection and remittance. The South Dakota v Wayfair decision is important and welcomed as it will seek to end unequal application of state government imposed sales taxes. Here in Massachusetts, we have always had the “New Hampshire problem,” but we also have a very tech savvy consumer, all too likely to send their vital discretionary dollars out of our local economy, to tax free sellers easily found right on their smart phones. Thus for many years, local stores have had two strikes against them as tax free competitors have proliferated.

Although the NH problem won’t be fixed, this decision certainly contains the competitive damage of tax free internet sellers. RAM will be working closely with the Department of Revenue and our Beacon Hill leaders in the days to come to make sure as much as possible is done to create a fair marketplace and a level taxation playing field for sellers of all types.

While the Wayfair case is a clear win for our membership, cost mitigation is a better description of the so-called “Grand Bargain” which is now on the Governor’s desk. Presumably it will be signed into law before the July 3 signature submission deadline for ballot initiative sponsors—including RAM’s own sales reduction tax measure.

As you know, RAM filed our sales tax reduction initiative for multiple purposes, including sales tax fairness with other sellers, and for leverage against expected employer mandate ballot initiatives. The timing was appropriate given the proposed constitutional amendment on a 4% income tax surcharge for those earning at least $1 million. Cutting the regressive sales tax benefiting lower income consumers and small businesses seemed well timed when paired with the Millionaires tax on the same ballot raising $2 billion in new income tax revenue. Having both on the ballot created an opportunity for a comprehensive tax reform debate—one which arguably could have made the system more progressive. Yet, a state Supreme Judicial Court (SJC) challenge threatened to throw off the income tax measure.

Around the same time as the SJC challenge, the US Supreme Court (SCOTUS) heard the SD v. Wayfair case to revisit Quill. Those two court challenges certainly created scenarios which could affect RAM’s decision to ultimately take the sales tax reduction question to ballot. The outcome of the Wayfair case could have either made the sales tax ballot question more vital with a negative decision for the retail industry, or somewhat less important if a level playing field with internet sellers were achieved with a positive court ruling.

While awaiting outcomes for these two court cases, confidential discussions began on whether the sponsors of 3 proposed ballot questions could reach common ground and a balanced deal to drop them from the ballot. RAM was at the table as the sponsor of the sales tax ballot initiative. On the other side of the table was Raise Up MA (RUM), an organization of labor, religious and community action groups who were the sponsors of the Millionaires Tax constitutional amendment, and also the $15 minimum wage and paid family/medical leave initiative questions. (RUM is the same organization which lobbied through the Legislature the current $11 minimum wage, and were the sponsors of the successful paid sick leave ballot campaign). Joining RAM on the employer team were representatives of Associated Industries of MA, Boston Chamber of Commerce, MA Business Roundtable, MA Restaurant Association, National Federation of Independent Business, and Springfield Chamber of Commerce. Together we embarked on nearly 2 months of negotiations with RUM and key legislative leaders. The stated objective as directed by Beacon Hill leaders was to attempt to reach a “Grand Bargain.”

All the discussions were based upon an assumption that the Millionaires Tax would be knocked off the ballot by the SJC. And consequently RAM would be willing to negotiate the sales tax question off the November ballot; RUM would negotiate the paid leave and minimum wage initiative off; with all parties achieving some compromise and balance for a deal. Not considered part of the discussion, but still an important side factor for RAM was the Wayfair case.

For more than a month the RAM and RUM negotiating teams looked for common ground on the 3 silos of the ballot initiatives. The negotiations were tough, but respectful. After making some progress, but being unable to get any closer, the legislator negotiators did their work for about 2 weeks in June to find fair solutions for areas in which agreement had not occurred. All the while neither court decision had come down.

Finally this past Monday, the SJC did rule to keep the Millionaires Tax off the ballot, as was assumed all along in the negotiating process. With time short, RAM could not expect the process to be held up any longer waiting for SCOTUS on Wayfair. By Tuesday evening, RAM and RUM were both presented with the basics of the agreement on paid leave, minimum wage and the sales tax, and were asked if they would support the compromises in order to keep their initiatives off the ballot.

The Grand Bargain was accepted by RAM and we agreed that we would not file our sales tax reduction initiative if the agreement was signed into law. RUM agreed on the paid leave initiative, but had to wait until a meeting the last week of June to agree on the minimum wage measure.

Although the mandates in general and some specifics are costly and damaging, the reality is that if the $15 minimum wage went to the ballot it would pass, with increases over 4 years, a whopping 60% tip wage (vs the current 35%) and annual inflation increases beyond $15. Furthermore, the costly paid leave law set for the ballot would also pass, and with it the required 90% wage replacement up to $1000 per week, with 16 weeks of family leave and 26 weeks of medical leave. The contributions for the leave program would have been split evenly between the employer and the employee, and the cost of the mandate would have hit even the smallest of employers.

What we got under the Grand Bargain (click here for link to chart) mitigated both the minimum wage and paid leave initiatives in timing and costs. A 5 year roll out, a 45% tip wage (phased in with the minimum wage increase), and no annual inflation adjustments in the minimum wage were part of the bill. And for paid leave, the wage replacement is greatly reduced, as is the length of the benefit and the contribution of the employers.

Furthermore, as a direct benefit to the retail sector, an annual 2 day August sales tax holiday was mandated to help level the playing field with those sellers which do not collect the tax on 365 days. And to mitigate the effects of the $15 minimum wage for retailers, the Blue Law premium pay requirement for 52 Sundays and 6 holidays would be phased out. Dating back 4 decades to a time when the minimum wage was $3.15 and stores were prohibited to open on Sundays and certain holidays, the premium pay requirement made sense as a political tradeoff for allowing openings. Today, being the only industry in Massachusetts required to pay premium pay, one of only 2 states of 50 which even have the requirement for stores, and having internet sellers exempt from the requirement, made this reform absolutely necessary with a $15 minimum wage looming. The premium pay will be phased out over the same period as the increase of the minimum wage.

RAM’s biggest disappointment in the process was our inability to negotiate a teen wage, a common sense and good public policy job incentive which exists in 39 states. That battle must continue another day.

In the end, RAM’s sales tax initiative gave us important leverage to negotiate the best possible deal we could get for our members, and for the broader business community. Overall, our reaction to the “Grand Bargain” is best summed up by our press statement which follows below. In the days and weeks to come, RAM will be keeping our members up to date with education, updates on regulations and implementation efforts on all of these issues.

“The compromise legislation passed today contains very costly initiatives that will negatively impact the thousands of small business owners and their employees that RAM represents. The retail marketplace has never been more competitive, and the margins have never been smaller. The new payroll mandates passed today will significantly increase costs, resulting in businesses being less competitive, forcing some doors to close and good jobs to be lost. This is not rhetoric, but reality.

At the same time, the results would be far worse had these measures gone to the ballot, and the Legislature deserves credit for bringing the parties together to bring a balanced resolution. This has served as a learning experience for the business community. Interest groups are likely to keep advancing costly ballot initiatives they can’t get through the Legislature, and RAM believes we simply can’t afford to sit on the sidelines and hope for the best. We need to continue to be willing to engage and push back when necessary if we are to keep Massachusetts a place where a business can grow and thrive in an increasing competitive economy."